The top five asset classes to target in 2017
By Kristen McGachey, 22 Dec 16
As 2016 draws to a close, these are some of the key areas investors are pinning their hopes for the new year on.
The commodities sector has seen a striking reversal of fortunes since its bleak status at the beginning of the year.
By the tail end of the year, Heartwood investment manager Jade Fu says her “view on the commodity complex has become more constructive, owing to fundamental improvements that are being driven by a tighter supply/demand balance.”
“The significant price shock since mid-2014, coinciding with the end of the commodity super-cycle era, appears now to be accepted by investors and expectations have been reset,” she said. “Perceptions of increased fiscal spending in the US and policymakers’ commitment to revive growth have further boosted sentiment towards commodities.”
But Fu stresses that she prefers indirect exposure to commodities in her portfolio through debt and equity, as opposed to futures contracts.
Chris Beauchamp, head of market analysis at IG Group, also predicts the commodities boon will benefit the UK, particularly large cap mining companies.
“Rising demand, improving balance sheets and ongoing investor optimism is driving a bullish 2017 for the mining sector,” he said. “Additionally, valuations remain low for a lot of large cap names; for instance, Rio Tinto is at around 7x forward earnings, presenting a buying opportunity during the next period of volatility.”
Tags: Investment Management
